Anti-money laundering (AML) programs are designed to prevent financial crime by identifying and monitoring suspicious activity. These activities include using cash, wire transfers, or other electronic payments for illegal activities such as terrorism financing, drug trafficking, and corruption. AML compliance is a legal requirement that applies to all businesses in the financial services industry. It requires an aml program to identify, monitor, and report any suspicious activity within their business operations.
Applying risk-based approach
The risk-based approach is a key element of an aml programand is used to identify, assess and manage the risks of money laundering and terrorism financing (ML/TF). The risk-based approach enables you to prioritise activities and resources by identifying entities with the highest stakes. This can help you better focus on higher-risk clients or transactions while still maintaining an adequate level of compliance concerning lower-risk clients or transactions.
Customer due diligence and identification
To ensure compliance with Australia’s AML/CTF Act, you must identify customers, beneficial owners, and the source of funds. A person is considered a customer if they engage in a transaction with your business. The definition includes both individuals and legal entities such as corporations or partnerships. You should have appropriate processes that identify each customer on an ongoing basis until they cease being one (or otherwise exit your business).
The purpose of undertaking customer due diligence is:
Identifying and verifying beneficial owners
One of the essential steps in an AML compliance program is to identify and verify the beneficial owners of your customer. A “beneficial owner” is the person who ultimately owns or handles a company. They may also be known as “ultimate beneficiaries”, “sponsors”, or “controllers”. The beneficial owner can be an individual, such as a shareholder, a group of individuals acting together (such as partners), or even another business entity, such as another corporation.
In many cases, you don’t need to disclose this information to anybody other than your regulators and possibly not even them if you’re doing all your AML reporting in-house.
Professional Indemnity Insurance Requirements
It is a type of insurance that safeguards against financial loss caused by professional negligence. It’s vital for businesses that offer services to protect their reputations, credibility, and ability to continue operating if something goes wrong with a client’s project.
Professional indemnity insurance covers the costs associated with any legal action taken against your business. In Australia, these claims can include:
Training staff on anti-money laundering obligations
Training should be continuous and tailored to the role of the staff member. It is vital to ensure that training is relevant to your business and industry. Training should also be conducted by qualified staff familiar with AML/CTF requirements and any other regulatory requirements relating to your industry.
Training records should be documented to demonstrate that you have trained all relevant employees to identify suspicious transactions or behaviour, report them through a Suspicious Transaction Report (STR), and keep records as required under Australian law.
As you can notice, there are numerous requirements that businesses in the financial services industry must follow to comply. By taking these steps, you will be able to reduce your risk of being targeted by criminals who want to use your business as a way of laundering money.